TYLER, Texas, Jan. 31, 2013 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. ("Southside" or the "Company") (Nasdaq:SBSI) today reported its financial results for the three months and year ended December 31, 2012.

Southside reported net income of $8.2 million for the three months ended December 31, 2012, a decrease of $1.3 million, or 14.0%, when compared to the same period in 2011. Net income for the year ended December 31, 2012 decreased $4.4 million, or 11.3%, to $34.7 million when compared to $39.1 million for the same period in 2011.

Diluted earnings per common share were $0.47 and $0.55 for the three months ended December 31, 2012 and December 31, 2011, respectively. For the year ended December 31, 2012, diluted earnings per common share decreased $0.26, or 11.5% to $2.00 when compared to $2.26 for the same period in 2011.

The return on average shareholders' equity for the year ended December 31, 2012, was 12.83%, compared to 16.20% for the same period in 2011. The return on average assets was 1.05% for the year ended December 31, 2012 compared to 1.25% for the same period in 2011.

"We are pleased to report on the results for 2012 and the continued progress made during the fourth quarter," stated Sam Dawson, President and Chief Executive Officer of Southside Bancshares, Inc. "During 2012 we experienced a noticeable increase in loan demand which fortunately translated into a 16.2%, or $175.7 million, growth in loan balances outstanding. Our lending teams in all of the markets we serve report continued demand for capital and housing as we begin 2013. Overall credit in our loan portfolio remains sound. During 2012, we produced a double digit return on shareholder's equity of 12.83%. We used those earnings to increase cash dividends paid to shareholders by 29.7%, and repurchased just over $7.4 million in common stock at an average price of $20.86.

"As we look ahead to 2013, we look forward to opening a second branch in Austin during the first quarter. We are extremely pleased to report that we have hired two highly successful Austin veterans to complement the team at our existing branch. Leading this new endeavor is a talented Southside lender from East Texas that has strong ties to Austin. We anticipate this branch will generate primarily commercial loan business. We will continue enhancing our current markets and reviewing new markets that complement our existing franchise. Maintaining focus on continuing the loan growth momentum from 2012 into 2013 will be one of our top priorities. Through technology we are developing additional customer capabilities and increasing productivity. During 2013 we will review our overall cost structure for additional cost containment or cost reduction opportunities.

"During the fourth quarter, the overall securities portfolio decreased approximately $55 million. The largest decrease was in mortgage-backed securities ("MBS") which decreased approximately $108 million, primarily due to monthly principal roll-off. Purchases of MBS were limited, with the largest purchases being floating rate MBS as the risk/reward profile of the fixed rate portion of this sector remains less favorable, in management's view. The addition of the Federal Reserve purchasing $40 billion of MBS per month will likely further limit MBS purchases until the economics in this sector change. In addition we sold some of our longer maturity general market tax free municipal securities when the market pricing for these securities caused the economics of purchasing this sector to become unattractive. During the quarter our net purchases of U.S. Agency debentures were approximately $61 million and we also had purchases of $19 million of taxable municipals. As in the past, our strong preference for mostly Texas municipal credits remains.

"As a result of having excess funds at the Federal Reserve during the quarter, the purchase of floating rate MBS and U.S. Agency debentures, and fewer higher priced FHLB advances maturing, our net interest margin decreased 13 basis points during the fourth quarter of 2012, when compared to the third quarter. We anticipate any further pressure on our margin will be mitigated by the maturity of higher priced FHLB advances, the re-pricing of our trust preferred long-term debt, and potential future loan growth. During the first three quarters of 2013, $138.5 million of FHLB advances with an average cost of 3.81% will mature. Of that total, $66.8 million with an average cost of 3.63% will mature during the first quarter. In addition, $9.0 million of FHLB advances with an average cost of 2.65% matured on December 31, 2012. During the first quarter of 2013 we will also realize the full effect of the re-pricing of $36.1 million of long-term debt from an average fixed rate of 6.86% to an average floating rate of three-month LIBOR plus 1.64%.

"We look forward to growing our franchise and seizing opportunities during 2013. I would be remiss if I did not point out that our employees, officers and their customer focus are the key reasons for our success. On behalf of everyone at Southside, we appreciate your continued support. We look forward to serving our customers and executing our strategy during 2013."

Loans and Deposits

For the year ended December 31, 2012, total loans increased by $175.7 million, or 16.2%, when compared to December 31, 2011. During the year ended December 31, 2012, real estate 1-4 family increased $121.4 million, real estate other increased $30.2 million, municipal loans increased $13.7 million, construction loans increased $2.4 million, commercial loans increased $16.5 million, and loans to individuals decreased $8.4 million.

Nonperforming assets increased for the year ended December 31, 2012 by $1.5 million, or 11.6%, to $14.7 million, or 0.45% of total assets at December 31, 2012, when compared to 0.40% at December 31, 2011. This increase is primarily a result of an increase in restructured loans, repossessed assets and other real estate owned.

During the year ended December 31, 2012, deposits, net of brokered deposits, increased $174.6 million, or 8.1%, compared to December 31, 2011. During the year ended December 31, 2012, public fund deposits increased $112.2 million.

Net Interest Income for the Three Months

Net interest income decreased $4.0 million, or 16.2%, to $20.6 million for the three months ended December 31, 2012, when compared to $24.6 million for the same period in 2011. For the three months ended December 31, 2012, our net interest spread decreased to 2.88% when compared to 3.24% for the same period in 2011. The net interest margin decreased to 3.09% for the three months ended December 31, 2012 compared to 3.47% for the same period in 2011. The primary reason for the decrease in the net interest spread and margin was an increase in prepayments on our MBS which resulted in increased amortization expense.

Net Interest Income for the Year

Net interest income decreased $6.3 million, or 6.6%, to $89.1 million for the year ended December 31, 2012, when compared to $95.4 million for the same period in 2011. For the year ended December 31, 2012, our net interest spread decreased to 3.02% from 3.34% for the same period in 2011. The net interest margin decreased to 3.26% for the year ended December 31, 2012 compared to 3.60% for the same period in 2011. Increased prepayments on our MBS were the primary reason for the decrease in the net interest margin and spread.

Net Income for the Three Months

Net income decreased $1.3 million, or 14.0%, for the three months ended December 31, 2012 to $8.2 million when compared to the same period in 2011. The decrease was the result of a decrease in net interest income of $4.0 million, which was partially offset by a net $2.0 million increase in gain on sale of securities and fair value gain-securities and a decrease in impairment charges related to our FHLB advance option fees of $1.1 million.

Noninterest expense increased $1.6 million, or 9.0%, for the three months ended December 31, 2012, compared to the same period in 2011, primarily due to an increase in salaries and employee benefits and FDIC insurance.

Net Income for the Year

Net income for the year ended December 31, 2012 decreased $4.4 million, or 11.3%, to $34.7 million, when compared to $39.1 million for the same period in 2011. This decrease was due to a $6.3 million decrease in net interest income, a $3.2 million increase in provision for loan losses and a net $2.0 million decrease in gain on sale of securities and fair value gain-securities, partially offset by a $6.9 million decrease in the impairment charges on FHLB advance option fees.

Noninterest expense increased $3.8 million, or 5.2%, primarily as a result of an increase in salaries and employee benefits, telephone and communication expense, director fees and occupancy expense.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $3.24 billion in assets that owns 100% of Southside Bank. Southside Bank currently has 48 banking centers in Texas and operates a network of 49 ATMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/investor. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data. To receive e-mail notification of company news, events and stock activity, please register on the E-mail Notification portion of the website. Questions or comments may be directed to Susan Hill at (903) 531-7220, or susan.hill@southside.com.

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Forward-Looking Statements

Certain statements of other than historical fact that are contained in this document and in other written material, press releases and oral statements issued by or on behalf of the Company, a bank holding company, may be considered to be "forward-looking statements" within the meaning of and subject to the protections of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date.  These statements may include words such as "expect," "estimate," "project," "anticipate," "appear," "believe," "could," "should," "may," "likely," "intend," "probability," "risk," "target," "objective," "plans," "potential," and similar expressions. Forward-looking statements are statements with respect to the Company's beliefs, plans, expectations, objectives, goals, anticipations, assumptions, estimates, intentions and future performance and are subject to significant known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. For example, discussions about trends in asset quality, capital, liquidity, growth and earnings and certain market risk disclosures, including the impact of interest rate and other economic uncertainty, are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations.  By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future.  As a result, actual income gains and losses could materially differ from those that have been estimated.

Additional information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 under "Forward-Looking Information" and Item 1A. "Risk Factors," and in the Company's other filings with the Securities and Exchange Commission.  The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

CONTACT: Susan Hill
         (903) 531-7220
         susan.hill@southside.com